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This paper introduces a new hybrid ASIC/FPGA chip architecture that is being developed in collaboration between IBM and Xilinx, and highlights some of the design challenges this offers for designers and CAD developers. We review recent data from both the ASIC and FPGA industries, including technology features, and trends in usage and costs. This background data indicates that there are advantages to using standard ASICs and FPGAs for many applications, but technical and financial considerations are increasingly driving the need for a hybrid ASIC/FPGA architecture at specific volume tiers and technology nodes. As we describe the hybrid chip architecture ,we point out evolving tool and methodology issues that will need to be addressed to enable customers to effectively design hybrid ASIC/FPGAs. The discussion highlights specific automation issues in the areas of logic partitioning, logic simulation, verification, timing, layout and test.